Kamyab Jawan

Youth Entrepreneurship Scheme

Pre-Feasibility Study
Dairy Farm

Small and Medium Enterprises Development Authority

Ministry of Industries & Production
Government of Pakistan
www.smeda.org.pk

HEAD OFFICE
4th Floor, Building No. 3, Aiwan-e-Iqbal Complex, Egerton Road,
Lahore
Tel: (92 42) 111 111 456, Fax: (92 42) 36304926-7
helpdesk@smeda.org.pk

REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE

Punjab Sindh Khyber Pakhtunkhwa Balochistan
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Egerton Road Lahore, Karachi. The Mall, Peshawar. Airport Road, Quetta.
Tel: (042) 111-111-456 Tel: (021) 111-111-456 Tel: (091) 111-111-456 Tel: (081) 2831623, 2831702
Fax: (042) 36304926-7 Fax: (021) 35610572 Fax: (091) 5286908 Fax: (081) 2831922
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Pre-Feasibility Study Dairy Farm

Table of Contents
1. DISCLAIMER .................................................................................................................................................. 3
2. PURPOSE OF THE DOCUMENT ................................................................................................................. 4
3. INTRODUCTION TO SMEDA ...................................................................................................................... 4
4. INTRODUCTION TO SCHEME.................................................................................................................... 5
5. EXECUTIVE SUMMARY ............................................................................................................................... 5
6. BRIEF DESCRIPTION OF PROJECT & PRODUCT ................................................................................. 6
7. CRITICAL FACTORS ..................................................................................................................................... 6
8. INSTALLED & OPERATIONAL CAPACITIES.......................................................................................... 6
9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT .............................................................................. 7
10. POTENTIAL TARGET MARKETS ........................................................................................................... 7
11. DAIRY PRODUCTION PROCESS............................................................................................................. 7
12. PROJECT COST SUMMARY .................................................................................................................... 10
12.1. PROJECT ECONOMICS ........................................................................................................................... 10
12.2. PROJECT FINANCING ............................................................................................................................ 10
12.3. PROJECT COST ...................................................................................................................................... 11
12.4. SPACE REQUIREMENT .......................................................................................................................... 11
12.5. MACHINERY AND EQUIPMENT ............................................................................................................ 12
12.6. FURNITURE AND FIXTURE ................................................................................................................... 12
12.7. RAW MATERIAL REQUIREMENT ......................................................................................................... 13
12.8. HUMAN RESOURCE REQUIREMENT .................................................................................................... 14
12.9. REVENUE GENERATION ....................................................................................................................... 14
12.10. OTHER COSTS .................................................................................................................................... 15
13. CONTACTS OF SUPPLIERS AND CONSULTANTS ........................................................................ 15
14. ANNEXURE ............................................................................................................................................. 17
14.1. INCOME STATEMENT............................................................................................................................ 17
14.2. BALANCE SHEET ................................................................................................................................... 18
14.3. CASH FLOW STATEMENT ..................................................................................................................... 19
14.4. USEFUL PROJECT MANAGEMENT TIPS ............................................................................................... 20
14.5. USEFUL LINKS....................................................................................................................................... 21
15. KEY ASSUMPTIONS ............................................................................................................................. 23

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1. DISCLAIMER
This information memorandum is to introduce the subject matter and provide a general
idea and information on the subject. Although, the material included in this document is
based on data / information gathered from various reliable sources; however, it is based
upon certain assumptions which may differ from case to case. The information has been
provided on “as is where is basis” without any warranties or assertions as to the
correctness or soundness thereof. Although, due care and diligence has been taken to
compile this document, the contained information may vary due to any change in any of
the concerned factors, and the actual results may differ substantially from the presented
information. SMEDA, its employees or agents do not assume any liability for any
financial or other loss resulting from this memorandum in consequence of undertaking
this activity. The contained information does not preclude any further professional
advice. The prospective user of this memorandum is encouraged to carry out additional
diligence and gather any information which is necessary for making an informed
decision, including taking professional advice from a qualified consultant / technical
expert before taking any decision to act upon the information.

In case the document is intended to be used for loan application under any
specified loan scheme, respective scheme parameters are to be incorporated
accordingly. In doing so, financial results may vary from results shown in this
document.

For more information on services offered by SMEDA, please contact our website:
www.smeda.org

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2. PURPOSE OF THE DOCUMENT

The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs
in project identification for investment. The project pre-feasibility may form the basis of
an important investment decision and in order to serve this objective, the document /
study covers various aspects of project concept development, start-up, production,
marketing, finance and business management.
The purpose of this document is to facilitate potential investors in dairy farm by
providing them with a general understanding of the business with the intention of
supporting potential investors in crucial investment decisions.
The need to come up with pre-feasibility reports for undocumented or minimally
documented sectors attains greater imminence as the research that precedes such
reports reveal certain thumb rules; best practices developed by existing enterprises by
trial and error, and certain industrial norms that become a guiding source regarding
various aspects of business set-up and it’s successful management.
Apart from carefully studying the whole document, one must consider critical aspects
provided later on, which form basis of any investment decision.

3. INTRODUCTION TO SMEDA
The Small and Medium Enterprises Development Authority (SMEDA) was established in
October 1998 with an objective to provide fresh impetus to the economy through
development of Small and Medium Enterprises (SMEs).
With a mission "to assist in employment generation and value addition to the national
income, through development of the SME sector, by helping increase the number, scale
and competitiveness of SMEs", SMEDA has carried out ‘sectoral research’ to identify
policy, access to finance, business development services, strategic initiatives and
institutional collaboration and networking initiatives.
Preparation and dissemination of prefeasibility studies in key areas of investment has
been a hallmark of SME facilitation by SMEDA
Concurrent to the prefeasibility studies, a broad spectrum of business development
services is also offered to the SMEs by SMEDA. These services include identification of
experts and consultants and delivery of need based capacity building programs of
different types in addition to business guidance through help desk services.

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4. INTRODUCTION TO SCHEME
Prime Minister’s ‘Kamyab Jawan – Youth Entrepreneurship Scheme’, for young
entrepreneurs between the age group of 21 - 45 years, is designed to provide
subsidized financing through the National Bank of Pakistan, Bank of Punjab and Bank
of Khyber under the guidance and supervision of the State Bank of Pakistan.

The loans will be disbursed to SME beneficiaries across Pakistan, covering; Punjab,
Sindh, Khyber Pakhtunkhwa, Balochistan, Gilgit Baltistan and Azad Jammu & Kashmir.
The Program aims to provide 25% of the loans to women entrepreneurs.

Loans provided through Kamyab Jawan Program are segregated in two tiers: Tier 1
loans fall in the range of Rs. 100,000 to Rs. 500,000, with Debt: Equity 90:10 and 6%
markup to borrower, and, Tier 2 loans are from Rs. 500,000 to Rs. 5 Million, with Debt:
Equity 80:20 and 8% markup to borrower. Both loans are for a period of upto 8 years
with a grace period of 1 year.

Application forms are available both in branches and dedicated websites of National
Bank of Pakistan, Bank of Punjab and Bank of Khyber.

5. EXECUTIVE SUMMARY
This pre-feasibility is about setting up a dairy farm in which cows are kept primarily for
milk production in semi-conventional open shed housing system with modern machine
milk collection system and cow comfort through ventilators and water sprinklers. The
cows are fed nutritionally balanced Total Mixed Ration (TMR) at 3% of live body weight.
Breeding plan would be implemented through Artificial Insemination method to gain
optimum milk yields in lactation cycle of average 300 days. Successful dairy farming
would involve recommended best husbandry practices for housing, breeding, feeding,
watering, disease control and hygienic production of milk on farm.
A dairy farm with 15 cows, preferably jersey or crossbred cows, needs a total
investment estimated at Rs. 5.98 million out of which the capital cost of the project is
Rs.5.60 million with working capital of Rs. 0.38 million. It is assumed that starting from
15 cows in first year of project, dairy herd would be increased to approximately 70 cows
by implementing its own heifer management program till 10th year of business, keeping
2% mortality rate and 15%culling for adult cows.
The Internal Rate of Return (IRR), payback period and Net Present Value (NPV) of the
project are estimated to be 39%, 3.76 years and Rs. 22.32 million respectively. The
farm will provide employment opportunity to 03 individuals. The legal status of the
project is proposed as sole proprietorship.

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6. BRIEF DESCRIPTION OF PROJECT & PRODUCT

The proposed dairy farm would be established on leased land with purpose built shed
constructed on conventional housing system. The farm would start the operations with
15 pregnant cows. After calving, each cow would produce average 25 litres of milk daily
through out the lactation cycle of 300 days. The purchase price of cow with these
production parameters is Rs. 300,000/ cow. Total milk production of 97,500 liters would
be obtained by the end of first year. The culling of non-productive cows would be done
at the rate of 15% per annum. Newborn suckling calves would be fed on milk replacer.
The breeding of animals would be planned through effective ‘Artificial Insemination (AI)’
method. Female calves would be retained at farm and given special attention and raised
as heifers. Male calves would be sold in first month of age to interested farmers for calf
fattening purpose. The milk will be primarily sold to bulk buyers at the rate of average
Rs.70 per liter. The farm will also offer milk sale to domestic individual consumers.

7. CRITICAL FACTORS
 Background knowledge and related experience of the entrepreneur in dairy farm
operations.
 Application of good husbandry practices such as timely feeding, watering and
vaccination to ensure animal’s health, cow comfort and disease-free environment.
 Awareness about the supply and demand of milk in the market as demand of
milk is relatively higher in summer as compared to winter season.
 Efficient marketing of the project and bulk supply to wholesalers.
 It is important to note that the production efficiency of dairy farm depend on the
genetic worth of dairy cows, timely AI breeding with genetically superior semen,
feeding of high quality dairy ration and thorough culling of non-productive cows
along with focused on disease and health management of herd.

8. INSTALLED & OPERATIONAL CAPACITIES

In the proposed study, initially, 15 cows of preferably Jersey breed or cross bred of high
genetic worth are recommended to obtain optimum milk production in first year of project.
It is assumed that on average, 80% cows would be in lactation (Wet status) and 20%
would be in dry status on farm. Heifers born at farm would be given special attention so
that these could build future milking herd of farm; hence the number of animals would be
70 at 10th year of project. The male calves would be sold in first month of age. The farm
will have the capacity to sale 97,500 liters of milk, primarily direct to consumers and then
milk contractors and processors in its first year of operation.

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9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT

Dairy farming is a viable business proposition for both rural and peri-urban areas of
Pakistan. There is almost equal demand for milk in rural and peri urban areas around
the major cities such as Lahore, Faisalabad, Jhang, Sahiwal, Pakpattan, Jehlum,
Peshawar, Charsadda, D.I. Khan, Quetta, Zhob, Lasbela, Karachi, Hyderabad, Sakkar
etc. across the country; hence, from the demand point of view, the said project offers
good investment opportunities for small scale investment in all provinces of country.

10. POTENTIAL TARGET MARKETS

Apart from Lahore, Sialkot, Kasur, Gujranwala, Bahawalpur, Okara, Dadu, Lasbela, D I.
Khan etc., dairy farming in rural and peri-urban locations around all major is primary
markets. Following are some of the target clients for a dairy farmer;
 Domestic consumers
 Milk contractors and suppliers
 Milk collection and processing companies
 Dairy products manufacturing companies

11. DAIRY PRODUCTION PROCESS

 Selection of good and preferably purebred local dairy breeds such as Sahiwal, Red
Sindhi and Cholistani or exotic breeds such as Jersey cows. Crossbred cows
(cross of local cow breeds with semen of exotic breeds e.g. Holstein Friesian and
Jersey) may also be considered.
 Selection of genetically superior cows with excellent body condition and udder
health: average daily milk production of 25 liters or above for cows in 2nd or 3rd
lactation, essentially with no disease history.
 Housing: Good housing leads to good management practices and ultimately
optimum production. Generally, housing should be;
i. Less expensive
ii. Well ventilated, comfortable and dry with hygienic environment
iii. Easy drainage and removal of dung urine and waste material
iv. Protective from extreme environmental conditions
v. Maximum sun exposure: axis of length to be east to west
vi. Availability of feed and water for 24 hours
vii. Planed so that future expansion may be possible when required
 Feeding: The lactating cows are fed 1 kg of Dry Matter (DM) feed per 1.75 litres
of milk produced. The ration allows nutritionally balanced feed in 24 hours. It
includes dry matter with 60% concentrate and 40% roughages containing 16%
Crude Protein (CP) and energy to increase animal productivity. It is better to use

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Total Mixed Ration (TMR) for feeding the cows. Additionally, urea molasses
blocks and salt blocks can help in better milk production. New born calves should
be fed colostrum for first three days and milk replacer @ 8-10% of body weight
for first three months of age. After that, TMR should be added to its feeding plan.
 Watering: Supply of clean drinking water in clean troughs i.e. 50 to 80 liters of
water consumption/adult animal/day round the clock maintains the milk
production capacity of the animal.
 Breeding: Efficient and timely Artificial Insemination (AI) of good genetic worth is
a key to success in good breeding programs of herd. Timely detection of heat in
cows should be given special attention to attain efficient breeding efficiency in
herd. Calf care and heifer management is very important in maintaining dairy
farm production. The proposed farmer will raise female calves as future breeding
heifers which will replace culled dairy animals. The first generation (F1) will be
capable of breeding at age of 14 months; hence producing milk at about 23-24
months of age.
 Calving: Pregnant cows should be given special attention in third trimester of
pregnancy and should be separated in pregnancy pens if possible. Veterinary
assistance should be sought out in case of emergency. Calf care and heifer
management is very important in maintaining dairy farm production.
 Milking: Lactation period is the period during which animals yield milk after
calving. The animals producing milk are called ‘Wet Animals’. Generally standard
lactation period is taken as 300+ 5 days. This pre-feasibility study has taken 80%
of the total number of animals as wet cows. The calving interval (interval between
two calving) in cows is 12-14 months. The average daily milk yield of a cow is 25
litres.
 Udder health: Hygienic and clean milking twice a day (morning/ evening) lowers
the chances of mastitis as udder health and hygiene is most important in dairy
animals.
 Proper storage of milk should be done preferably at temperature of 4 Oc.
 Disease management: De-worming for endo-parasitic infestations is necessary in
calves born at farm. Timely vaccination against infectious diseases should be
done as a prophylactic measure. At a well managed farm, mortality in adult cows,
heifers and new born calves should not exceed 2%, 3% and 5% per annum
respectively. Sick animals should be separated from healthy ones and kept in
quarantine.

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 Following is a tentative vaccination schedule to be essentially followed at dairy

farm;
Table 1: Tentative Vaccination Schedule
Disease Vaccine Time for vaccination Dose/ Administration
Foot & Mouth FMD (VRI) February/March & 5 ml sub cut.
Disease (FMD) September/October
Black Quarter BQ March/April 5 ml sub cut.

Haemorrhagic HS (VRI) May/June & 5 ml / 300 kg body wt

Septicemia (HS) November/December sub cut.
Anthrax Anthrax August 1 ml sub cut.

Brucella Abortus BA Once in life for heifers 1ml sub cut.

(4-12 months of age)
(VRI: Veterinary Research Institute, Lahore)

 Record keeping: The animals should be ear-tagged having information of animal

such as breed, age, date of birth/ purchase, number of lactations, vaccination etc.
The records for daily milk yields, weight, Artificial Inseminations (AI), calving,
vaccination and medication etc. are also important.
 Culling: Good productive animals should be selected and uneconomical animals
should be culled. Low yielding culled animals may be sold in the regular livestock
market. On an average, cows are productive for 7 to 8 years. The culling rate of
15% per annum in the total herd is desirable for a successful dairy farm.
 Regular technical assistance from the livestock professionals and experts.
Returns on the scheme and its profitability are highly dependent on the efficiency
of above mentioned factors. In case dairy farm is not able to attain its target milk
production or implement effective husbandry practices, it will not be able to cover
the potential market and recover payments; hence, cost of operating the business
will increase.

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12. PROJECT COST SUMMARY

A detailed financial model has been developed to analyze the commercial viability of
dairy farm project. Various cost and revenue related assumptions along with results of
the analysis are outlined in this section. The projected Income Statement, Cash Flow
Statement and Balance Sheet are attached as annexure.

12.1. Project Economics

The following table shows Internal Rate of Return (IRR), payback period and Net
Present Value (NPV) of the proposed project;
Table 2: Project Economics

Description Details
Internal Rate of Return (IRR) 39%
Payback Period (Year) 3.76
Net Present value (NPV) Rs. 22,318,275

12.2. Project Financing

Following table provides details of the equity required and variables related to bank
financing;

Table 3: Project Financing

Description Details
Total Equity (20%) Rs. 1,196,220
Bank Loan (80%) Rs. 4,784,881
Markup to the Borrower (%age/annum) 8%
Tenure of the Loan (Years) 8
Grace Period (Years) 1

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12.3. Project Cost

Following table shows the operational requirements identified for the proposed
business;
Table 4: Capital Investment for the Project

Capital Investment Amount (Rs.)

Cost of Cows 4,500,000
Machinery & equipment 951,200
Furniture and fixture 39,360
Office Equipment 5,000
Pre-operating costs 105,000
Total Capital Costs 5,600,560

Raw material inventory 237,982

Cash in hand 119,903
Upfront farm rent 22,656
Total Working Capital 380,541
Total Project Cost 5,981,101

12.4. Space Requirement

Following table shows calculations for project space requirements, the area has been
calculated to accommodate 15 animals each from wet cows, dry cows and calves;
Table 5: Space Requirement in Year 1
Area per Total Required Area
Description
animal Sq.ft. (year 1-4)
Shed space for wet cows 80 1,200
Open paddock for wet cows 160 2,400
Shed space for dry cows 80 1,200
Open paddock for dry cows 160 2,400
Shed space for calves 40 600
Open paddock for calves 80 1,200
Stores for fodder, concentrate & machine 400
Store for chillers, milk storage and utensils 144
Silage Bunker 513
Rooms for workers 90
Servant washroom 48
Total space requirements 10,195

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Farm space would be increased as the number of animals increase in herd. Dairy farm
building is obtained on rent and more farm area would be included in shed is
constructed keeping in view the expected expansion in the start of year 4. The total farm
area required for 10 years is approximately 4.2 kanals (around 0.5 acre) which would be
acquired on rent at approximately Rs. 22,650 per month.

12.5. Machinery and Office Equipment

Following table provides list of machinery and office equipment required for the
proposed dairy farm;
Table 6: List of Machinery and Office Equipment

Description Unit Rate (Rs.) No. Cost (Rs.)

Calf feeder 2,000 4 8,000
Calf Cages 18,000 5 90,000
Cooling System*
(4 cone fans, water pads, water 50,000 2 100,000
pumps & water lines)
Cluster Milking Line 150,000 3 450,000
Chiller for milk (500 litres) 200,000 1 200,000
Energy Savers 400 8 3,200
Cell phone 5,000 1 5,000
Miscellaneous 100,000 Lump sum 100,000
Total 956,200

12.6. Furniture and Fixture

Following table provides list of furniture and fixture required for the proposed dairy farm;
Table 7: List of Furniture

Unit Rate
Description No. Cost (Rs.)
(Rs.)
Tables 5,000 1 5,000
Fans (75 W) 4,000 1 4,000
*Energy Savers 200 1.8 360
(may be rounded off to 2)
Miscellaneous 30,000 Lump sum 30,000
Total 39,360
*Figure rounded off to near decimal.

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12.7. Raw Material Requirement

Following tables show raw material requirement to run the proposed dairy farm in first
year of production;

Table 8: Daily Feeding Requirements for One Adult Cow*

Requirement Rate Amount
Description
(Kg/ Cow/ Day) (Rs./ Kg) (Rs.) per day
TMR Allowance 15 31 465
(@ 3 % of live body weight)
Total 465
*Avg. weight of cow is assumed to be 500 kgs with 25 liters of daily milk production for 300 days lactation
period
Table 9: Total Feeding Requirements for One Suckling Calf* (0-3 Months age)
Days Requirement Rate Amount
Description (No.) (Litres/ Calf/ Day) (Rs./ Kg) (Rs.)
Milk Replacer 90 4 50 18,000
(@8-10 % of body weight)
Total 18,000
*Avg. weight of healthy calf is assumed to be 45 kgs.

Table 10: Daily Feeding Requirements of One Heifer*(3-12 months’ age)

Requirement Rate Amount
Description
(Kgs/ Heifer/ Day) (Rs./ Kg) (Rs.)
TMR Allowance 8.25 31 255.75
(@ 3 % of live body weight)
Total 255.75
*Avg. weight of younger heifer is assumed to be 275 kgs.

Table 11: Total Cost of AI and Vaccination in Year 1

Animals Rate Amount
Description
(No.) (Rs./year) (Rs. per year)
Artificial Insemination (AI) 13* 5,000 65,000
Cows
Vaccination and 20** 1,000 20,000
medication
Total 85,000
*Out of 15 cows, two are culled, hence cows available for AI are 13
**13 cows and 7 new born calves would make a herd of 20 animals on farm for vaccination and medication.

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Table12: Total Costs in Year 1

Description Cost (Rs.)*

Feeding of Adult Cows 2,206,425
Feeding of Female Calves (Age 0-3 month) 128,250
Feeding of Heifers (Age 3-12 months) 501,110
Total Feeding Cost 2,835,785
AI Charges of Adult Cows 65,000
Vaccination/ Medication Charges 20,000
Total AI/ Vacc. Cost 85,000
Total 2,920,785
*Feed costs are rounded off to near decimal point for every animal for 365 days of feeding

12.8. Human Resource Requirement

Table 13: Human Resource Requirement

Description No. Monthly Salary Annual Salary

(Rs.) (Rs.)
Owner/ Farm supervisor 01 30,000 360,000
Farm workers 02 17,500 420,000
Total 03 780,000
Two trained farm worker will be required to assist the owner for husbandry practices
and farm operations.

12.9. Revenue Generation

Table 14: Revenue Generation

Description Units Annual Production** Rate Annual Revenue in
(Rs./Unit) Year 1 (Rs.)
Milk sales (farm gate) Liters 97,500 70 6,825,000
Calf 6.63 ~ 7
Sale of male calves** 10,000 66,263

Cow 2.25 ~ 2
Sale of culled cows** 150,000 337,500

Total 7,228,763
** Note: number of animals produced per year are rounded off to near decimal point for every
culled or sold animal while actual calculations. Figures in this table may vary from the income
statement due to the rounding effect.

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12.10. Other Costs

An essential cost to be borne on farm is electricity cost which is assumed to be Rs.
2,000 per month for farmer’s residential purpose. The electricity cost for farm
machinery, milking machines and chillers is Rs. 39,903 per month.
The maintenance cost for machine and equipment is Rs, 10,000 per month.
The communication expense is Rs. 3,000 per month.

13. CONTACTS OF SUPPLIERS AND CONSULTANTS

Table 15: List of Suppliers and Consultants
Consultants
Dean, Faculty of Animal Husbandry Director General (Extension)
University of Agriculture, Faisalabad Livestock & Dairy Development Department
Ph: 041-9920161-70 (L&DD), Govt. Of Punjab, 16-Cooper Road,
Lahore. Ph: 042-99201117
Dean, Faculty of Animal Production Dr. Nasir Javed
University of Veterinary & Animal Sciences, Consultant
Lahore Lead Foundation, West wood Colony, Lahore
Ph: 042-99211374 Cell: 0300-8432595
Feed Suppliers AI / Semen Suppliers
ICI Pakistan Cattle Feed Al - Haiwan Sires, 5-Km, Pakpattan Road,
63-Mozang Road Lahore Sahiwal
Ph: 042-36370042 Ph: 040-4501271-72
Doctor’s Dairy Feeds Altaf & Company, Altaf & Co Plaza, 16/1, Out
203/7, UC-3, Cattle colony, Bin Qasim, Fall Road, Lahore.
Karachi. Ph: 042-35763411-4
Ph: 021-5081923-27
Hi-Tech Feeds Pvt. Ltd. Ghazi Brothers
1-A, Shadman Chowk, Jail Road, Lahore. B-35 KDA Scheme No 1,
Ph: 042-37564503 Mian Muhammad Shah Road, Karachi.
Ph: 021-4543579
Anmol Vanda World Wire Sires by Maxim International Pvt.
c/o Livestock and Dairy Development Ltd.
Department, Govt. of Punjab, 69-A, Sector-XX, Khayaban-e-Iqbal, DHA,
16-Cooper Road, Lahore Lahore.
Free Landline: 0800-78685, 0800-78686 Ph: 042-35693993
Alhalal Wanda Ghazi Brothers
Al-Halal Livestock Concern Company B-35 KDA Scheme no 1, Mian Muhammad
Super High Way Jahania Shah Road, Karachi.

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Ph: 065-2002373 Ph: 021-4543579

Machinery Suppliers Milk Contractors/ Processors
Kurdson Industries Nestle Pakistan
Sabri Road, Angoori Scheme, Baghbanpura, 308, Upper Mall, Lahore
Lahore Ph: 042-35757082-95
UAN +92-42-111637853
Ph: 042-36843472
Nestle, Engro, Gourmet, etc.
Dairy Solution Pvt. Ltd. Gourmet Pvt. Ltd.
177/B- Johar Town, Lahore 73-F, Quid-e- Azam Industrial estate,
Ph: +92-42-35169450 +92-42-35169451 Kot lakhpat Lahore
Ph: 0423-5121052
Fax +92-042-35169449
Cattle Kit Pvt. Ltd. Pakistan Engro Foods Pvt. Limited
104-A, Punjab Government Servants 5th, 6th Floor, Harbor Front Building
Housing Society Near Mohlan Waal, Lahore Marine Drive, Block 4, Clifton, Karachi.
Ph: +92 (042) 35978500-3 Ph: +92 21 3529-6000 (10 lines)
Email: Info@cattlekit.com.pk
Web: www.cattlekit.com.pk
Livestock Mandies
The animals may be procured from local livestock breeders and livestock mandies scheduled in
different districts such as Pattoki, Okara, Bahawalnagar, Lodhran, Vehari, Khanewal, Arifwala,
Pakpattan etc. as per scheduled by Livestock and Dairy Development Department, Govt. of The
Punjab Lahore. Free Landline: 0800-78685, 0800-78686

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14. ANNEXURE

14.1. Income Statement

Statement Summaries SM EDA
I ncome Statement
Rs. in actuals
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Revenue 7,228,763 6,590,202 9,329,887 12,162,442 16,155,318 21,220,884 28,158,090 36,664,872 45,055,170 60,186,993
Cost of goods sold 3,939,616 4,867,512 6,097,309 7,847,381 10,659,798 13,917,390 18,476,997 24,095,337 31,808,385 43,373,945
Gross Profit 3,289,146 1,722,689 3,232,577 4,315,061 5,495,520 7,303,494 9,681,092 12,569,535 13,246,785 16,813,048

General administration & selling expenses

Administration expense 360,000 395,050 433,513 475,720 522,037 572,863 628,638 689,843 757,007 830,710
Rental expense 271,874 299,062 328,968 361,864 398,051 875,712 963,283 1,059,612 1,165,573 1,282,130
Utilities expense 24,000 26,400 29,040 31,944 35,138 38,652 42,517 46,769 51,446 56,591
Travelling & Comm. expense (phone, fax, etc.) 36,000 39,600 43,560 47,916 52,708 57,978 63,776 70,154 77,169 84,886
Office vehicles running expense - - - - - - - - - -
Office expenses (stationary, etc.) - - - - - - - - - -
Promotional expense - - - - - - - - - -
Insurance expense - - - - - - - - - -
Professional fees (legal, audit, etc.) - - - - - - - - - -
Depreciation expense 99,556 99,556 99,556 99,556 99,556 99,556 99,556 99,556 99,556 99,556
Amortization expense 21,000 21,000 21,000 21,000 21,000 - - - - -
Property tax expense - - - - - - - - - -
Miscellaneous expense - - - - - - - - - -
Subtotal 812,430 880,668 955,636 1,038,001 1,128,490 1,644,762 1,797,771 1,965,934 2,150,751 2,353,873
Operating Income 2,476,716 842,022 2,276,941 3,277,061 4,367,030 5,658,732 7,883,321 10,603,601 11,096,033 14,459,175

Other income - - - - - - - - - -
Gain / (loss) on sale of assets - - - - - - - - - -
Earnings Before Interest & Taxes 2,476,716 842,022 2,276,941 3,277,061 4,367,030 5,658,732 7,883,321 10,603,601 11,096,033 14,459,175

Interest expense 366,709 329,774 289,774 246,453 199,538 148,728 93,701 34,106 - -
Earnings Before Tax 2,110,007 512,248 1,987,167 3,030,607 4,167,492 5,510,004 7,789,621 10,569,495 11,096,033 14,459,175

Tax 206,501 5,612 188,075 377,652 670,247 1,073,001 1,496,367 2,469,322 2,653,611 3,830,710
NET PROFI T/(LOSS) AFTER TAX 1,903,506 506,635 1,799,092 2,652,956 3,497,245 4,437,003 6,293,254 8,100,172 8,442,422 10,628,464

Balance brought forward 951,753 1,458,388 3,257,481 5,910,436 9,407,681 13,844,684 20,137,939 28,238,111 36,680,533
Total profit available for appropriation 1,903,506 1,458,388 3,257,481 5,910,436 9,407,681 13,844,684 20,137,939 28,238,111 36,680,533 47,308,997
Dividend 951,753 - - - - - - - - -
Balance carried forward 951,753 1,458,388 3,257,481 5,910,436 9,407,681 13,844,684 20,137,939 28,238,111 36,680,533 47,308,997

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Pre-Feasibility Study Dairy Farm

14.2. Balance Sheet

Statement Summaries SM EDA
Balance Sheet
Rs. in actuals
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Assets
Current assets
Cash & Bank 119,903 203,522 297,894 1,299,511 2,982,044 5,261,797 8,079,151 12,352,841 17,688,221 23,402,350 40,865,999
Accounts receivable - 560,959 498,390 713,604 949,094 1,258,798 1,652,173 2,197,390 2,853,715 3,506,427 4,685,861
Finished goods inventory - - - - - - - - - - -
Equipment spare part inventory - - - - - - - - - - -
Raw material inventory 237,982 334,987 478,551 701,248 1,052,677 1,559,551 2,340,735 3,365,498 4,989,758 7,453,948 -
Pre-paid annual land lease - - - - - - - - - - -
Pre-paid building rent 22,656 24,922 27,414 30,155 33,171 36,488 40,137 44,150 48,566 53,422 -
Pre-paid lease interest - - - - - - - - - - -
Pre-paid insurance - - - - - - - - - - -
Total Current Assets 380,541 1,124,390 1,302,250 2,744,519 5,016,986 8,116,634 12,112,196 17,959,879 25,580,259 34,416,148 45,551,860

Fixed assets
Land - - - - - - - - - - -
Building/Infrastructure - - - - - - - - - - -
Animals 4,500,000 4,600,000 5,670,000 7,111,125 9,666,169 12,823,591 16,783,103 21,843,559 27,860,588 36,197,658 47,237,944
Machinery & equipment 951,200 856,080 760,960 665,840 570,720 475,600 380,480 285,360 190,240 95,120 -
Furniture & fixtures 39,360 35,424 31,488 27,552 23,616 19,680 15,744 11,808 7,872 3,936 -
Office vehicles - - - - - - - - - - -
Office equipment 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 -
Total Fixed Assets 5,495,560 5,496,004 6,466,448 7,808,017 10,263,505 13,321,371 17,181,327 22,142,227 28,059,700 36,297,214 47,237,944

Intangible assets
Pre-operation costs 105,000 84,000 63,000 42,000 21,000 - - - - - -
Legal, licensing, & training costs - - - - - - - - - - -
Total Intangible Assets 105,000 84,000 63,000 42,000 21,000 - - - - - -
TOTAL ASSETS 5,981,101 6,704,394 7,831,698 10,594,536 15,301,490 21,438,005 29,293,522 40,102,106 53,639,960 70,713,362 92,789,804

Liabilities & Shareholders' Equity

Current liabilities
Accounts payable - 116,539 149,141 193,697 257,906 351,924 473,906 646,787 845,040 1,138,950 1,546,642
Export re-finance facility - - - - - - - - - - -
Short term debt - - - - - - - - - - -
Other liabilities - - - - - - - - - - -
Total Current Liabilities - 116,539 149,141 193,697 257,906 351,924 473,906 646,787 845,040 1,138,950 1,546,642

Other liabilities
Lease payable - - - - - - - - - - -
Deferred tax - - - - - - - - - - -
Long term debt 4,784,881 4,339,882 3,857,948 3,336,013 2,770,759 2,158,589 1,495,609 777,601 - - -
Total Long Term Liabilities 4,784,881 4,339,882 3,857,948 3,336,013 2,770,759 2,158,589 1,495,609 777,601 - - -

Shareholders' equity
Paid-up capital 1,196,220 1,196,220 1,196,220 1,196,220 1,196,220 1,196,220 1,196,220 1,196,220 1,196,220 1,196,220 1,196,220
Gain / Loss on Net value of Animals - 100,000 1,170,000 2,611,125 5,166,169 8,323,591 12,283,103 17,343,559 23,360,588 31,697,658 42,737,944
Retained earnings - 951,753 1,458,388 3,257,481 5,910,436 9,407,681 13,844,684 20,137,939 28,238,111 36,680,533 47,308,997
Total Equity 1,196,220 2,247,973 3,824,609 7,064,826 12,272,825 18,927,492 27,324,007 38,677,718 52,794,919 69,574,412 91,243,162
TOTAL CAPI TAL AND LI ABI LI TI ES 5,981,101 6,704,394 7,831,698 10,594,536 15,301,490 21,438,005 29,293,522 40,102,106 53,639,960 70,713,362 92,789,804

Note: Total assets value will differ from project cost due to first installment of leases paid at the start of year 0
- - - - - - - - - - -

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Pre-Feasibility Study Dairy Farm

14.3. Cash Flow Statement

Note: Total assets value will differ from project cost due to first installment of leases paid at the start of year 0
- - - - - - - - - - -

Statement Summaries SM EDA

Cash Flow Statement
Rs. in actuals
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Operating activities
Net profit - 1,903,506 506,635 1,799,092 2,652,956 3,497,245 4,437,003 6,293,254 8,100,172 8,442,422 10,628,464
Add: depreciation expense - 99,556 99,556 99,556 99,556 99,556 99,556 99,556 99,556 99,556 99,556
amortization expense - 21,000 21,000 21,000 21,000 21,000 - - - - -
Deferred income tax - - - - - - - - - - -
Accounts receivable - (560,959) 62,568 (215,214) (235,489) (309,704) (393,374) (545,217) (656,326) (652,711) (1,179,434)
Finished good inventory - - - - - - - - - - -
Equipment inventory - - - - - - - - - - -
Raw material inventory (237,982) (97,005) (143,564) (222,698) (351,428) (506,874) (781,184) (1,024,763) (1,624,260) (2,464,191) 7,453,948
Pre-paid building rent (22,656) (2,266) (2,492) (2,741) (3,016) (3,317) (3,649) (4,014) (4,415) (4,857) 53,422
Pre-paid lease interest - - - - - - - - - - -
Advance insurance premium - - - - - - - - - - -
Accounts payable - 116,539 32,602 44,555 64,209 94,018 121,982 172,881 198,253 293,910 407,692
Other liabilities - - - - - - - - - - -
Cash provided by operations (260,638) 1,480,372 576,306 1,523,551 2,247,788 2,891,923 3,480,334 4,991,697 6,112,981 5,714,130 17,463,648

Financing activities
Change in long term debt 4,784,881 (444,999) (481,934) (521,934) (565,254) (612,170) (662,980) (718,007) (777,601) - -
Change in short term debt - - - - - - - - - - -
Change in export re-finance facility - - - - - - - - - - -
Add: land lease expense - - - - - - - - - - -
Land lease payment - - - - - - - - - - -
Change in lease financing - - - - - - - - - - -
Issuance of shares 1,196,220 - - - - - - - - - -
Purchase of (treasury) shares - - - - - - - - - - -
Cash provided by / (used for) financing a 5,981,101 (444,999) (481,934) (521,934) (565,254) (612,170) (662,980) (718,007) (777,601) - -

Investing activities
Capital expenditure (5,600,560) - - - - - - - - - -
Acquisitions - - - - - - - - - - -
Cash (used for) / provided by investing a (5,600,560) - - - - - - - - - -

NET CASH 119,903 1,035,373 94,372 1,001,617 1,682,533 2,279,753 2,817,354 4,273,690 5,335,380 5,714,130 17,463,648

Cash balance brought forward 119,903 203,522 297,894 1,299,511 2,982,044 5,261,797 8,079,151 12,352,841 17,688,221 23,402,350
Cash available for appropriation 119,903 1,155,275 297,894 1,299,511 2,982,044 5,261,797 8,079,151 12,352,841 17,688,221 23,402,350 40,865,999
Dividend - 951,753 - - - - - - - - -
Cash carried forward 119,903 203,522 297,894 1,299,511 2,982,044 5,261,797 8,079,151 12,352,841 17,688,221 23,402,350 40,865,999

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Pre-Feasibility Study Dairy Farm

14.4. Useful Project Management Tips

Technology
 List of Machinery & Equipment (As per Section 12.5)
 Animal Selection: Selection of disease free animals with good breed
characteristics, body conditions and health.
 Feed, Vaccination, Medication, AI Services: Should be procured from
reputed and reliable sources.
 Energy Requirement: Should not be overestimated or installed in excess
and alternate source of energy for critical operations be arranged in advance
 Machinery Suppliers: Should be asked for after sales services under the
contract with the machinery suppliers
 Quality Assurance & Standards: Whatever means required for animal
production quality standards need to be defined on the ear tags and a system
of record keeping to check them to improve credibility
Marketing
 Product Development: Expert's help may be engaged for marketing of
each batch of animal
 Ads & P.O.S. Promotion: Business promotion and dissemination through
banners and launch events is highly recommended. Product broachers from
good quality service providers
 Sales & Distribution Network: Expert's advise and distribution
agreements are required with.
 Price - Bulk Discounts, Cost plus Introductory Discounts: Price should
never be allowed to compromise quality. Price during introductory phase may
be lower and used as promotional tool. Product cost estimates should be
carefully documented before price setting. Government controlled prices shall
be displayed.
Human Resources
 List of Human Resource (As per Section 12.8)
 Adequacy & Competencies: Skilled and experienced staff should be
considered an investment even to the extent of offering share in business
profit.

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Pre-Feasibility Study Dairy Farm

 Performance Based Remuneration: Attempt to manage human

resource cost should be focused through performance measurement and
performance based compensation.
 Training & Skill Development: Encouraging training and skill of self &
employees through experts and exposure of best practices is route to
success. Least cost options for Training and Skill Development (T&SD) may
be linked with compensation benefits and awards.

14.5. Useful Links

 Prime Minister’s Office, www.pmo.gov.pk
 Government of Pakistan, www.pakistan.gov.pk
 National Youth Development Program. www.kamyabjawan.gov.pk
 Ministry of Industries & Production, www.moip.gov.pk
 Ministry of National Food Security & Research, www.mnfsr.gov.pk
 Ministry of Education, Training & Standards in Higher Education,
www.moptt.gov.pk
 Government of Punjab, www.punjab.gov.pk
 Government of Sindh, www.sindh.gov.pk
 Government of Khyber Pakhtunkhwa, www.khyberpakhtunkhwa.gov.pk
 Government of Balochistan, www.balochistan.gov.pk
 Government of Gilgit Baltistan, www.gilgitbaltistan.gov.pk
 Government of Azad Jammu & Kashmir, www.ajk.gov.pk
 Trade Development Authority of Pakistan (TDAP), www.tdap.gov.pk
 Securities & Exchange Commission of Pakistan (SECP), www.secp.gov.pk
 Federation of Pakistan Chambers of Commerce and Industry (FPCCI)
 www.fpcci.com.pk
 Punjab Board of Investment & Trade (PBIT), 23-Aikman Road, GOR-I, Lahore
Tel. 042-99205201, www.pbit.gop.pk
 Sindh Board of Investment (SBI), 1st Floor, Tower B, Finance & Trade Center,
Shahra-e-Faisal, Karachi, Tel. 021-99207512-4, www.sbi.gos.pk
 State Bank of Pakistan (SBP), www.sbp.org.pk
 National Bank of Pakistan (NBP), www.nbp.com.pk
 First Women Bank Limited (FWBL), www.fwbl.com.pk
 Pakistan Agricultural Research Council (PARC), Islamabad, Tel. 051-9203966
www.parc.gov.pk
 National Agricultural Research Centre (NARC), Islamabad, Tel. 051-9255061,
www.parc.gov.pk
 National Veterinary Laboratory, NARC, Islamabad Tel. 051-9255108
 Balochistan Agricultural Research Centre (BARC), Quetta, Tel: 081-9213286-7,
www.parc.gov.pk

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Pre-Feasibility Study Dairy Farm

 Southern-zone Agricultural Research Centre (SARC), Karachi, Tel: 021-

99261661, 99261561, www.parc.gov.pk
 Arid Zone Research Institute (AZRI), Bahawalpur, Tel: 0622-876833,
www.parc.gov.pk
 Punjab Livestock & Dairy Development Board (PLDDB), 11- Shami Road, Lahore
Cantt. Tel. 042-36676821, www.plddb.pk
 University of Agriculture, Faisalabad, www.uaf.edu.pk
 Lasbela University of Agriculture, Water & Marine Sciences, Lasbela,
www.luawms.edu.pk
 Sindh Agriculture University, Tondojam, www.sau.edu.pk
 Gomal College of Veterinary Sciences, Dera Ismail Khan, www.gu.edu.pk
 KPK Agricultural University, Peshawar, www.aup.edu.pk
 Pir Mehr Ali Shah Arid Agricultural University, Rawalpindi, www.uaar.edu.pk
 University College of Veterinary & Animal Sciences, Islamia University
Bahawalpur (IUB), www.iub.edu.pk
 University of Veterinary & Animal Sciences (UVAS), Out Fall Road, Lahore,
www.uvas.edu.pk
 Bahauddin Zakariya University (BZU), Multan, www.bzu.edu.pk
 Nestle Sarsabz Training Institute, Renala Khurd, Okara c/o Nestle Lahore, Tel:
0423-111-637-853
 Animal Husbandry In-Service Training Institute (AHITI), Peshawar, Tel. 091-
2960109, 9210309
 Veterinary Research Institute (VRI), Ghazi Road, Lahore Cantt., Tel. 042-
99220140
 Al - Haiwan Sires Training Institute, Jogi Chowk, Sahiwal, Tel. 040-4227196,
4221486, 061-6775708
 Altaf & Co Livestock Training Institute, Altaf & Co Plaza,16/1,Out Fall Road,
Lahore, Tel: 042-35763411-4, www.altafandco.com
 Solve Agri Pak Ltd, F-6/2, Main Link Road, Model Town, Lahore, Tel: 042-
35969602-3 www.solveagripak.com
 Dairy & Rural Development Foundation (DRDF), Lahore,
www.dairyproject.org.pk
 Agribusiness Support Fund (ASF), Lahore, www.asf.org.pk
 Directorate of Livestock Farms, L&DD, Lahore, Tel: 042-99201126-7
 Directorate of Small Holder Dairy Development, Gujranwala, Tel: 055-9200410-
11, 9200194
 Buffalo Research Institute Bhunikey, District Pattoki, Tel: 049-4421887, 4420072
 Livestock Experiment Station (LES), Dera Chahl Lahore, L&DD, Punjab, Tel:
042-99239818, 99239819
 Research Centre for Conservation of Sahiwal Cattle (RCCSC), Jhang, Tel: 047-
9200329, 9200371, www.rccsc.com.pk

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Pre-Feasibility Study Dairy Farm

 Directorate of Livestock Training Centre (LSTC), Bahadurnagar, Okara, Tel: 044-

2661393
 Livestock & Fisheries Department, Government of Sindh, www.sindh.gov.pk
 Agriculture & Livestock Department, Government of KPK,
www.khyberpakhtunkhwa.gov.pk
 Livestock & Dairy Development, Government of Balochistan,
www.balochistan.gov.pk

15. KEY ASSUMPTIONS

Table 16: Key Assumptions
Description Details
Purchase Price of One cow (Rs.) 300,000
Daily milk production per cow (Litres) 25
Average lactation length of cow (days) 300
Milk sale price (Rs.) 70
Annual milk sale price growth rate (%) 10
Wet to dry cows ratio in herd 80:20
Capacity utilization (%) 100
Selling price of a culled cow (Rs.) 150,000
Selling price of male calf (Rs.) 10,000
Sale price of a low yielder cow (Rs.) 150,000
Mortality in calves (%/ annum) 5
Annual mortality rate in adult cows (%) 2
Annual culling rate (%) 15

Small and Medium Enterprises Development Authority - (SMEDA) 23